Can someone help explain this to me I want to search Kansas

Can someone help explain this to me? I want to search Kansas city southern railroad. KSU Use the Internet search engine of your choice and do a general search on the name of a company of interest to you. Explore the web site of the company you choose and locate that company’s most recent financial statements. You may need to look under a category that provides general information about the company and/ or investor information. Find and read the description of the company, including the type of business it is in. Why is gaining an understanding of the industry and type of business an important starting point for financial statement analysis? Locate the company’s primary financial statements. Find the summary table of ratios in this chapter in Exhibit 14–26. Calculate three of the listed ratios under each of the following categories: “Measures of short-term liquidity” and “Measures of profitability.” Show your work in calculating these ratios. Write a brief statement describing what you have learned about your company’s liquidity and profitability. Why do you think the Internet has become such a widely used source of financial information by investors and creditors? For your response post, you will be taking on the role of the manager and respond to your employee’s memo. Inform the employee as to what specific managerial decisions, conclusions, and/or judgments can you make from the information provided in that memo. Do not respond to a memo that has already received a managerial response.

Measures of profitability Dollar Amount of Change Financial Statement Amount in the Earlier Year Percentage changes, that The rate at which a key measure is increasing or is, in net sales and net decreasing; the \"growth rate\" income A measure of the profitability of the company\'s Gross Profit Net Sales Gross profit rate Operating expense ratio products A measure of management\'s ability to control Operating Expenses Net Sales expenses The profitability of a company\'s basic businesS Gross Profit-Operating Expenses activities Page 656 Operating income Net income as a percentage of net sales An indicator of management\'s ability to control costs Net Income Net Sales Net Income Preferred Dividends Average Number of Common Shares Outstanding Net income applicable to each share of common Earnings per share stock A measure of the productivity of assets, regardless Operating Income Average Total Assets Return on assets of how the assets are financed The rate of return earned on the stockholders Net Income Average Total Equity Return on equity equity in the business The rate of return earned on the common Return on common Net Income - Preferred Dividends Average Common Stockholders\' Equity stockholders\' equity; appropriate when company has both common and preferred stock stockholders\' equity

Solution

Kansas City Southern Railroad is a transportsation company in rail operating with two primary subsidiaries in US and Mexico.

It is important to first understand the type of business and the industry in which the business operates for a financial statement analysis becuase every industry has different set of parameteres of profitability, liquiidity, asset management and solvency. An analysis of financial statments is done using ratio analysis and the ratios become meaningful only when the results are analysed from the industry point of view.

The measures of prfitability for our company can be worked out using the following ratios:

Measures of short term liquidity

From the above ratio of profitability, we can say that the company has good profitabiltiy. The profit margin has remained the same in both the years 2015 and 2016 which means the company has maintianed its profitabiltiy. Hoewever, the return on equity has decreased due to an increase in total equity without an equal increase in net income. This measn the returns of shareholders have decreased by 1%. Also the return on assets have remained the same. Overall the company\'s profitabiltiy has remained constant over both the years.

The short term liquidity of the company is low. This is because the current ratio is less than 1 which means the current assets are not enough to pay for the current obligations. This poses short term risk for the company. Also the quick ratio is very low as more than 20% of the assets are that of inventory. This makes the imeediate liquidity very low. However both ratios have improved slighlty in 2016 with an increase in current assets in the form of cash. The receivables turnover has decreased in 2016 which means the company is slow in collecting receivables and thus free funds are low. Thus the overall liqiuidity is low for the company.

Internet has become a widely used source of information for investors and creditors as the annual reports of the company is available on the company\'s website and the information in the annal report can be used to make financila analysis. Also the news reports available on the internet can be used for further anaysis.

The information on the company\'s profitabiltiy and liquidity can be used to why the liquidity is low and depending on that actions can be taken to improve the same.

Working notes:

2334.2/191

= 12.2

	2015	2016
Profit margin	20.1%	20.6%
Return on assets	9.6%	9.3%
Return on equity	12.4%	11.7%